The Role of Art & Antique Dealers An Added Value


is one of the biggest problems for new dealers starting out, often creating an insurmountable barrier to entry versus older established dealers with good track records, credit histories and substantial inventories.


In the past the financing required to open a shop and purchase inventory came from a dealer’s personal or family wealth or alternatively external financing (such as bank loans or an overdraft facility extended to dealers based on a rising art market). During the late 1970s and 1980s, banks in many of the major art markets were relatively liberal with credit and there was a large amount of lending to the art market. However, following a series of economic slow downs and credit crunches combined with defaulting loans and bad debts, financing from institutional lenders tightened and it has become very difficult to access credit. Dealers reported that lines of credit have usually only given to businesses with very high revenues or based on a dealer’s own personal creditworthiness.


To overcome difficulties in accessing bank financing, dealers reported that they have collaborated with private backers (for example, private high net worth individuals or other dealers). Such collaborations were advantageous to the private backer as they achieved access to the inside track, trade discounts, and expert advice and decision making, but it was not uncommon for deals to break down, for example if the backer, not understanding liquidity issues in the art market, wanted their money back at an inopportune time.


Despite the difficulties faced in accessing loans and financing, in general, dealers are financially resourceful, particularly in tough economic times, often using combinations of private overdrafts, borrowing from colleagues, private arrangements, and other sources. Although they are financially much smaller than their auction house counterparts, the size and flexibility of some dealer businesses has meant greater success for some than large corporations during recessionary periods. A particular issue raised by dealers about the current financial recession, however, was its fast hitting nature. In a very short period of time, some dealers were faced with no credit but did not have sufficient time to reduce costs, so were forced to sell stock or downsize dramatically to pay bills, rather than taking a more measured approach to negotiating new terms and reducing outgoings.


A number of dealers stated that they preferred to be self-financing and hence try to organise their business around selling enough inventory to buy new stock outright. The issues related to financing are also proportional to the amount of stock a dealer holds, with dealers selling services or acting as agents experiencing less credit problems as their requirements for capital are lower. Those antique dealers that tended to buy low and restore pieces to sell also reported less credit problems.


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Estimates from Goldman Sachs, 2010. 36 Historical & Future Perspectives


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